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Further reforms will move Slovakia toward a more innovative and inclusive society

05/02/2019 - The Slovak economy is experiencing a robust, broad-based expansion that is boosting living standards and promoting convergence with higher-income countries. Policies should now aim to sustain this expansion, prepare people for the future of work and ensure that the benefits of strong growth are shared amongst all Slovaks, according to a new report from the OECD.

The latest OECD Economic Survey of the Slovak Republic looks at the factors behind the country’s economic performance, as well as the policies to maintain sound public finances, improve efficiency in the public sector and promote better education and up-skilling across the workforce. The Survey projects growth of 4.3% this year and 3.6% in 2020, and lays out an agenda for making the economy more innovative and more inclusive.

The Survey, presented in Bratislava by OECD Secretary-General Angel Gurría and Slovak Republic Prime Minister Peter Pellegrini, highlights the importance of policies to enhance the social integration of Roma and maximise the benefits from Slovakia’s integration in global value chains.

“The Slovak economy continues to record remarkable performance, with sustained growth promoting strong employment, solid public finances and a healthy financial system,” Mr Gurría said. “Living standards are gradually catching up with the higher-income OECD countries and nearly all indicators of well-being have been improving for the past 10 years. To sustain economic and social progress going forward, Slovakia needs to ensure this growth is more inclusive, move towards more sophisticated and innovative production and ensure that everyone has the skills and training for the jobs of tomorrow.” Read the full speech.

The Survey shows how Slovakia’s manufacturing economy is narrowly specialised around downstream activities, notably in the automotive industry, with low levels of domestic value-added and few spillover effects from Foreign Direct Investment for small and medium-sized enterprises or domestically-owned firms. Employment is vulnerable to automation and the workforce is not sufficiently prepared for the digital transition.

To ensure that Slovakia moves up the global value chain, the Survey highlights the need to improve educational outcomes, foster entrepreneurship and boost innovation, notably by strengthening the capacity to adopt new technologies. Facilitating immigration of skilled workers and improving the business environment, through reforms to restrictive licensing regulations and lengthy insolvency processes, is also required, the Survey said.

With the old-age dependency ratio set to rise steeply in the longer term, fiscal pressure will intensify. This makes it crucial to fully implement the 2012-13 pension reform, including the link of the retirement age to life expectancy.

As part of efforts to ensure everyone has opportunities to benefit equally from economic growth, the Survey points out the need to combat the exclusion facing Roma populations across Slovakia. Better economic and social integration of the Roma would not only reduce poverty rates and improve opportunities for these communities, but would also boost GDP and tax revenues, according to the Survey.

The education system can be made more inclusive, through expansion of high-quality early education, the employment of more Roma-speaking teaching assistants and greater Slovak language support for Roma children. Scaling-up successful EU-funded pilot programmes, such as community centres and health mediators, can boost participation and inclusion.

Strengthening the role of the Plenipotentiary for the Romani Community within the government could also lead to better policy coordination and drive efforts to better involve the Roma in dialogue and cooperation between their communities and public institutions, the Survey said.